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News & Press: Government Affairs News

Republicans Release Tax Reform Framework

Thursday, September 28, 2017   (0 Comments)
Posted by: Bradley Coffey, MA, AAOE Government Affairs
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Washington, DC - Capitol Hill Republicans have released their framework for tax reform discussions in an attempt to overhaul the United States Tax Code, something that hasn't been done since 1986. The framework was created by the House Committee on Ways and Means, the Senate Committee on Finance, and the White House and is the precursor to the introduction of legislation.

The framework discusses the changes in two categories, personal income tax and corporate taxes. In personal income taxes, tax payers could expect to see big changes in 2018, namely a 100% increase in the standard deduction for both married individuals filing jointly and single filers. Additionally, the seven tax brackets that currently govern how much filers must pay would be reduced to three brackets of 12%, 25%, and 35% (the framework does not specify what the thresholds for these brackets would be, that will come when legislation is introduced). Itemized deductions on personal income taxes would be eliminated with the exception of the home mortgage interest deduction and the charitable contributions deduction. Additionally, the personal exemptions for dependents would be repealed but the Child Tax Credit would be expanded. Rumors have circulated that the Republican plan would remove the deferred tax for 401k retirement plans however, the framework does not mention specifics about how retirement savings would be treated under the revised tax system.

Corporations can expect to see a reduction in the amount of taxes paid with a top corporate tax rate of 20% implemented for C corporations. Sole proprietorships, partnerships, and S corporations would have a maximum tax rate of 25%. One of the biggest changes for corporate tax would be the ability of businesses to immediately "expense" the cost of new investments in depreciable assets (other than structures) made after September 27, 2017 for at least five (5) years. Similar to personal income, many of the itemized deductions available to corporations today would be eliminated.

As this plan makes its way through Congress, expect to see the plan change as negotiators attempt to gain consensus with both Republicans and Democrats. Indeed, the Senate is already considering allowing companies to deduct shareholder dividends to get the corporate tax rate as low as 15% as President Trump has requested.

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